DECLARE @time TABLE
    (
     empno CHAR(3),
     datelog DATETIME,
     timein DATETIME,
     [timeout] DATETIME
    );
    
INSERT  INTO @time
        (empno, datelog, timein, [timeout])
VALUES
        ('001', '07/01/2012', '2:00pm', NULL),
        ('001', '07/02/2012', '1:00am', NULL),
        ('001', '07/02/2012', '2:00pm', '11:00pm'),
        ('001', '07/03/2012', '2:00pm', '11:00pm');
        
WITH    timetest
          AS (
              SELECT
                ROW_NUMBER() OVER (PARTITION BY EmpNo ORDER BY DateLog ASC) AS row_asc,
                empno,
                datelog,
                timein,
                [timeout]
              FROM
                @time
             ),
        inandout
          AS (
              SELECT
                TIN.empno,
                TIN.datelog,
                TIN.timein,
                TOUT.datelog AS timeout_date,
                CASE WHEN TIN.timeout IS NULL AND
                          TOUT.timeout IS NULL THEN TOUT.timein
                     ELSE TIN.timeout
                END AS [timeout]
              FROM
                timetest AS TIN
                LEFT JOIN timetest AS TOUT
                    ON TIN.empno = TOUT.empno AND
                       TIN.row_asc = CASE WHEN TIN.timeout IS NULL AND
                                               TOUT.timeout IS NULL
                                          THEN TOUT.row_asc - 1
                                          ELSE TOUT.row_asc
                                     END
             )
    SELECT
        *
    FROM
        inandout
    WHERE
        timein IS NOT NULL AND
        [TIMEOUT] IS NOT NULL